Punjab & Haryana HC Upholds charging 3% on Total Turnover of Assessee providing Accommodation Entries to Dealers to Reduce Tax Liabilities [Read Order]

The division bench of Punjab and Haryana has upholds charging 3% on total turnover of assessee, who provides accommodation entries to dealers to reduce tax liabilities.

The appellant, Anil Kumar, is engaged in the business of trading as a wholesaler. During the scrutiny proceedings, upon perusal of the bank accounts AO noticed that the appellant was an entry operator and found that the appellant had purchased goods from 21 firms whose addresses were either found to be not existing or such firms had refused to accept the service of notice under Section 131 of the Act.

The AO based on the findings under section 145 rejected the books of

account, which the appellant had not completely furnished and reckoning the trade practice in the case of entry operators, the AO took a view that the appellant must have charged 10% of these entries and accordingly assessed the total income of the assessee at Rs.1,07,76,050/- at 10% being in the business of providing entries to various businessmen.

First appellate authority has held that “the rate of 10% appears to be on the higher side as normally the payouts for arranging accommodation entries range on an range between 2.5% to 3.5%. I, therefore, peg the rate reasonably applicable at calculating the income at 3% of Rs/.10,77,60,505/-“. Aggrieved assessee preferred appeal before Tribunal, which confirmed the order. Against which, the assessee preferred appeal before High Court under section 260A.

The counsel for the appellant submitted that the assessment year 2014-15 has made assessment by taking income at 0.5 % on the total

turnover shown by the appellant. There was no difference in the nature of business of the appellant during the year in question i.e., assessment year 2013-14 and assessment year 2014-15. The appellant had further submitted that he is agreeable with the amount/income to be calculated at 0.5% of the total turnover worth Rs.10,95,32,827/- for the assessment year 2013-2014.

The High Court observed that the assessment years 2014-15 and 2015-16 are concerned, there is no material to indicate that the appellant had ventured into providing accommodation entries to the dealers to help them reduce the tax liabilities. The assessment years 2014-15 and 2015-16 are concerned the appellant had been seen as dealing in wholesale business of trading and as such the revenue itself had accepted 0.5 % ratio on the total billing to assess income of the assessee. Such distinguishing feature between the assessment year in question i.e., 2013-14 on the one hand and the assessment years 2014-15 and 2015-16 on the other hand could not be demolished at the hands of the appellant.

The Coram of Mr. Justice Tejinder Singh Dhindsa and Mr. Justice Pankaj Jain has held that “we find that the order dated 25.11.2021 passed by the Income Tax Appellate Tribunal is founded on sound and cogent reasoning. The same does not suffer from any legal infirmity”.

Mr. Susheel Gautam appeared on behalf of the appellant.

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